NCLT Directs Police Assistance To Resolution Professional After Corporate Debtor Hinders CIRP

In a rather uncommon development in IBC driven resolution process, the Mumbai bench of National Company Law Tribunal has directed the Police Commissioner, Ahmedabad to provide police assistance to a Resolution Professional who complained about ex-director of the corporate debtor abusing her and creating hindrance in the Corporate Insolvency Resolution Process.

A bench of Member Justice V P Singh and Member Technical Ravikumar Duraisamy asked the Police Commissioner to provide assistance to enable the Resolution Professional and her team to take control of the entire unit (office) of the corporate debtor while also directing the ex-director of the corporate debtor and all its other directors to appear in person before it on January 31 or face action under the Contempt of Court Act.

The bench also ordered that "All the powers of the Corporate Debtor and its Directors relating to the operation of the Bank Account anywhere in India are frozen".

Hema Shah, the Resolution Professional in the instant case titled Asset Reconstruction Company (India) Pvt Ltd V/s Shivam Water Treaters Pvt Ltd, says this is not a very common scenario that the Tribunal has to order police assistance and that she has rarely come across such orders in her career as a resolution professional.

Advocate Nipun Sighvi, an insolvency and corporate laws expert and consultant, said, "It is a welcome order since it is the first of its kind in Gujarat."

It is to be noted here that the instant matter was initially before the NCLT Bench in Ahmedabad which has only one judicial member and no technical member. Shivam Water Treaters, the corporate debtor, questioned the powers of the bench to hear the case in the absence of a technical member after which the matter was transferred to the Mumbai Bench. The corporate debtor, it be noted, was also one of the petitioners before the Supreme Court in the recent unsuccessful challenges to the constitutional validity of IBC.

In this case, Resolution Professional Shah had moved an application in NCLT to restrain the corporate debtor Shivam Water Treaters and its suspended director Gaurav Dave from using the company's properties, assets directly or indirectly in defiance of the provision of IBC, 2016.

She also complained of him creating hindrance in their work.

Based on her complaint, the NCLT had asked the promoter-ex director of the Corporate Debtor to remain present in the court on January 16 but he was only represented by his advocate.

The ex-director had sought exemption from personal appearance citing medical condition and annexed certain documents in its support.

The Tribunal, however, was not convinced, as it noted that, "The documents attached with the application is only the photocopy of the prescription and medical receipt regarding the sale of some medicines from Pharmacy, which can be easily made available. The applicant has not filed any medical certificate. Photocopy of prescription of any doctor or any cash receipt from the medical store is not authenticated document, which can be relied upon. It appears that Mr Gaurav Dave intentionally avoided to appear in the court and he does not want to hand over the documents required by the RP. Counsel for the RP has stated that their entry in the office is also restricted and the Ex- Director of the Corporate Debtor is creating hindrance in the CIRP. Grounds for exemption from appearance in court are sham excuses".

"In the circumstances, we pass an order for police assistance so that the Resolution Professional can take full control of the company without any interference from ex Director's or his officials. The Police Commissioner, Ahmedabad is directed to provide police assistance to RP and his team, so that the Resolution Professional can take control of the entire unit. All the powers of the Corporate Debtor and its Directors relating to the operation of the Bank Account anywhere in India are frozen. The RP is directed to serve a copy of this order to the concerned Bank so that the Corporate Debtor and its directors cannot operate the bank account," it ordered.

"Ex-Director of the Corporate Debtor Mr Gaurav Dave and all other Directors are directed to appear in person before this Bench on 31.1.2019, failing which order shall be passed under the Contempt of Court Act," it said.

Read Order